The war on Cuba's 'paladares' - The regime's campaign against private

Observers and analysts have been discussing the Castro regime's decision
to temporarily ban new licenses to open small restaurants (paladares) in
Havana, run by entrepreneurs. At the same time a warning has been issued
to those already operating that they will be subject to stricter
controls, with the initiation of a process of summons that will instruct
violators regarding regulation violations, including "evading taxes,
buying supplies on the black market or operating illegal clubs and bars. "

Limiting supply on any market is a public policy measure with very
negative effects on the population, with results that are just the
opposite of those it pursues, even in economies like Cuba's under Castro
in which the market delivers only a portion of goods and services, with
the State playing a major role in the their provisioning.

This absolutely unexpected decision by the regime flies in the face of
information indicating an increase in tourists and travellers,
constituting a market with a growing need for dining services. The
Castro regime's war against Cuba's paladares is nothing new. Whenever
any type of private economic activity flourishes on the Island,
reactionary Stalin-like measures are adopted to show who is in control
of the economy. What has happened with the paladares is just more of the
same.

Its immediate effects will be:
1. Stifling one of the possible channels for economic emancipation,
supposedly opened up by the "Guidelines."
2. Limiting the supply of popular food offerings, which will increase
the prices of those that continue to operate on the market.
3. Directly benefitting suppliers (State and hotels) that were
struggling to compete with small restaurants.
4. Curtailing growth in the supply of agricultural products for
entrepreneurs, thereby raising consumer prices.
5. Reducing the entry of "mules" with intermediate goods for small
restaurants that were having trouble obtaining supplies on domestic markets.
6. Frustrating expectations and personal projects.
7. Bolstering administrative/political control over economic activity.
8. Cutting job creation at these establishments.
9. Hampering the sector's evolution towards specialization,
diversification and improved productivity.
10. Producing a decline in tax revenues.

The main difference between the current campaign against the paladares
and previous efforts is that the regime's initiative against private
enterprise in Cuba is becoming increasingly sophisticated. Thus, the
meetings to which owners of paladares are summoned are attended by
"Popular Power" representatives from Havana and various State
institutions, such as the National Tax Administration Office (ONAT) and
the ubiquitous State Security. And, as stated by some of those called to
these meetings, they are told that the paladares are important to the
economy, and that the irregularities are not only found at private
businesses, but also State operations too. To date, however, the bulk of
the administrative pressure has fallen on the former.

Let us take a look at what these serious problems are, according to the
regime. For example, the use of public parking areas to accommodate
paladar customers (which could be resolved by renting them); the
purchasing of goods on the black market (an activity that is necessary
because there are constant shortages on the official ones); and other
more serious infractions, such as tax evasion, money laundering, and
even prostitution and drugs. There are also aspects that date all the
way back to the "Special Period," and that have become structural due to
the dynamics of the regime.

Castro's laws limit private restaurants to 50 seats or fewer, and they
are required to buy their supplies at State stores, despite the
permanent shortages at them and the high prices of their products.
Despite the obstacles these establishments face, Havana has seen a great
number of paladares appear and succeed recent years. These are
businesses that have competed with State restaurants and those located
in hotels thanks to their ability to offer customers good values.

Some analysts believe that the toughening of the regime's policy towards
the paladares is an example of how Raúl Castro is prioritizing certain
expenditures to the detriment of others. And, unlike during the "Special
Period," when blackouts and restrictions wrought widespread suffering
among the population, now the aims is for economic activity, private and
State, to pay for the adjustment to the very difficult scenario the
Castroist economy is suffering through today, as oil from Venezuela
wanes, loans are not paid back, and cash and liquidity are scarce.

And yet, impervious to discouragement, they are quick to announce the
fusion of currencies by 2017. Unbelievable.